Management of logistics real estate investment trust Prologis stated on Wednesday that leasing demand has been affected by uncertainty surrounding interest rate cuts in the near term. Despite this, the company maintains a positive outlook for the longer term.
Prologis reported first-quarter core funds from operations (FFO) in line with estimates but lowered its full-year guidance slightly. The company believes that market hesitancy will persist for the next two to three quarters, but is optimistic about the future due to growing deferred demand.
While lease signings have been delayed due to geopolitical concerns and higher interest rates, Prologis expects this trend to reverse once rates start to decrease. The company anticipates a positive impact on leasing activity following the first rate cut by the Federal Reserve.
Rental revenue increased year-over-year, and Prologis saw growth in consolidated revenue as well. However, occupancy rates across its portfolio experienced a slight decline. The company now expects average occupancy rates for 2024 to be slightly lower than previously projected.
Prologis remains confident in the market equilibrium for rent negotiations, despite some softness in certain regions like Southern California and the Inland Empire. Rent changes on multiyear leases have shown significant increases, indicating opportunities for higher rental rates.
Overall, Prologis maintains a positive outlook for the market despite current uncertainties. Shares of Prologis were down in trading on Wednesday.
